It’s Not Magic

Every day we see or hear reports detailing how much the stock market has moved either up or down based on the performance of an index such as the Dow Jones Industrial Average.  Opinions as to the whys and wherefores are delivered with an air of authority, only to be overturned by events often just a short time in the future.  Why do markets rise?  Is it some form of levitation perhaps?  How can the market rise and your stocks drop?  Witchcraft?  To dispel some of the superstition we must first remember that we are talking about a market for stocks, not some jellied whole that magically marches in lock step.  Each issue has its own reasons for the price fluctuations we see.  Here at Atlas Indicators we follow the daily volume of both the individual positions we monitor and of the indexes as a whole.  We watch to see where the weight of opinion falls as stocks are bought and sold.  We then employ these up and down volume statistics various ways, adjusting positions in an attempt to stay just ahead of trends.  We also track the percentage of bulls and bears among recognized investment advisors.  Currently the bulls are at their highest percentage for the year while bears, according to Investor Intelligence, are approaching a five-year low.  We can only hope that the majority will be right for a change.  Contrarians are starting to salivate though, seeing this as one sign a top of some sort may be building.  And it is just such opposing impressions of where reality lies that makes any show of prestidigitation so fascinating to watch.